Ontario’s financial services regulator announced last week that it has revoked the licences of 29 mortgage brokerages for failing to meet key regulatory requirements.
The regulator says the brokerages in question either did not appoint a principal broker, failed to file their 2021 Annual Information Return (AIR), or failed to do both.
Licenses are first suspended by FSRA if a brokerage fails to comply, but the regulator can go further when the situation is not remedied.
“It’s unfortunate that FSRA must take the step of revoking licences,” Wendy Horrobin, FSRA’s head of licensing and risk assessment, said in a statement. “However, we are confident that brokerages have been afforded multiple opportunities to comply, without ever providing a response.”
All licensed Ontario mortgage brokerages and administrators must file the Annual Information Return, a document containing information about business conditions, by March 31 every year.
A FSRA spokesperson told CMT this information allows the regulator to better understand how the mortgage industry operates, as well as alert it to the need for regulatory guidance or action if industry players are breaking the rules.
The crucial role of a principal broker
As part of those rules, all brokerages must have at least one principal broker whose job it is to oversee compliance. FSRA says that individual must be the owner of a brokerage in the case of a sole proprietorship, a general partner if it’s a limited partnership brokerage, a partner in a partnership brokerage, or an officer at a brokerage corporation.
Principal broker licences expire and must be renewed each year before March 31 or be transferred to another broker. If no one at a brokerage is able to fill the role, the brokerage’s licence will then be suspended.
A spokesperson from FSRA says the requirement to appoint a principal broker is a legal one, covered under the Mortgage Brokerages, Lenders and Administrators Act of 2006.
“A PB [principal broker] is responsible for taking reasonable steps to ensure that each agent is authorized to deal or trade in mortgages on behalf of the brokerage,” the spokesperson told CMT. “They also need to make sure that all the brokerage’s agents are complying with every requirement under the Act.”
It is possible for all 29 brokers to re-apply for a new brokerage licence. However, FSRA says any history of not following the rules will be considered when the regulator reviews such applications.
“The timeline to review and complete the application varies depending on the complexity of the application and how quickly the applicant responds to FSRA’s requests for information,” FSRA told us. “For those reasons, we can’t give an accurate estimation of the length of the process.”
annual information return broker licences Financial Services Regulatory Authority fsra licensing licensing requirements Ontario regulations regulator Wendy Horrobin
Last modified: June 28, 2024
